Pharma faces its own hurricane season

At press time, Hurricane Irene was slowly barreling toward the East Coast and threatening the area with a deluge that prompted cities to shut down and had store shelves wiped clean.

A similar phenomenon is happening in the drug industry as the patent cliff barrels, Irene-like, toward branded and generic drug manufacturers alike, forcing them to scramble for new sources of revenue in the coming years. According to IMS Health, $102 billion worth of drugs will face generic competition between 2011 and 2015. This presents problems for branded drug companies, which must find a new business model to replace the traditional blockbuster drug model, as well as generic drug companies, which will find themselves competing for an ever-dwindling pool of top-selling molecules. “The most important [trend] has been the wave of patent expiries,” IMS Health VP industry relations Doug Long told Drug Store News.

Chief among these is Pfizer’s Lipitor (atorvastatin calcium), a drug with sales more than $7 billion per year in the United States alone and which is scheduled to go generic by the end of this year. A chance remains that Ranbaxy, the company planning to launch the generic, might face delays in getting approval from the Food and Drug Administration due to concerns about problems at its manufacturing plants in India. Watson is planning to launch an authorized generic version of the drug around the same time.

After the patent cliff, one trend that will likely accelerate is consolidation among generic drug makers. “I think you’ll see more of those types of things,” Long said. “I think the market’s still not consolidated enough. When some of these small molecules [decrease] after 2014, there will be more mergers.”

One merger highlighted by Long was Par Pharmaceutical’s acquisition last month of Anchen Pharmaceuticals, a $410 million deal that gave Par access to Anchen’s portfolio of injectable drugs. While companies like Hospira have long specialized in generic injectables, it’s a field in which many generic companies may take an increasing interest in the years to come. “People are starting to expand outside the oral solid generic business and getting into other, more specialty types of generics, like injectables in particular,” Long said.

Authorized generics may represent another area of opportunity. To be sure, authorized generics are controversial in the generics business, with groups like the Generic Pharmaceutical Association opposing them. Authorized generics are branded drugs marketed under their generic names at a reduced price, usually through a third-party company, such as the case with Watson’s authorized generic version of Lipitor. Under the Hatch-Waxman Act of 1984, the first company to file and win approval from the FDA for a generic version of a drug gets 180 days in which to market the drug in direct competition with the branded version, after which any generic company can apply for approval of a generic version, eventually resulting in the molecule becoming commoditized.

But with authorized generics, the branded company can compete with the generic company on two fronts: one with its branded version and one with the cheaper authorized generic marketed by a third-party company. A number of traditional generics companies, such as Watson and Sandoz, market authorized generics, while others, such as Prasco, specialize in them. Despite the GPhA’s opposition, a study by the Federal Trade Commission found that while a generic drug could drive down the cost of the average $100 prescription by between $18.30 and $81.70, an authorized generic could drive it down by a further $8.10.

Consumers shop sparingly, late for BTS

New worries about the economy are affecting back-to-school shopping this fall. A recent National Retail Federation survey revealed that when shopping for back-to-school 2011, 44% of respondents said they were spending less overall, 37% were using coupons more often and half were shopping for sales more frequently.

Retailers promoted heavi­ly as consumers shopped late. Slightly more consumers said they would be shopping drug stores this year (21.1% versus 19.5% last year).

The article above is part of the DSN Category Review Series. For the complete Back To School Sell-Through Report, including extensive charts, data and more analysis, click here.

The flip side of the ride back from Boston

Somewhere along the road back from Boston, DSN publisher Wayne Bennett and I looked at each other and realized that the previous 24 hours or so had been some of the most productive time we had enjoyed at a trade show in quite a while. To be honest, that’s not exactly what we had expected when we headed to the National Association of Chain Drug Stores’ Pharmacy and Technology Conference a day earlier. Hurricane Irene — which had already dampened our travel plans — also had dampened our expectations.

Wayne’s house in Long Island is less than a half-mile away from one of the evacuation zones. For me, the flip side of being one of the few people in Manhattan with his own backyard is that I live on the ground floor, so I also am one of the few people in Manhattan in danger of floodwaters rising into my living room.

But once Irene blew by us, we decided to make the short drive to Boston to catch the last couple days of the show. And I’m glad that we did. We got a lot accomplished.

Now, I’m not going to pretend that the show broke new attendance records any more than I would write that the Convention Fairy visited every booth each night and left little magical sacks full of cash for everybody. Some people didn’t make it to Boston because of the weather; it’s not a three-hour drive for everybody. A small number of booths were empty.

But that wasn’t the vibe at the show. And that’s really amazing because I will tell you as a cynical journalist who has been to a lot of trade shows that even when the weather is great and everybody shows up, the squeaky wheels ALWAYS find a reason to complain about something. But this time the focus was on who WAS there versus who WASN’T there.

Maybe it’s because the flip side of having a couple of cancellations on your schedule is that it gives you an opportunity to take the conversations you are able to have a little deeper than you normally could in the span of the typical 30-minute trade show meeting. Some of the things you normally might have to wait for in the show’s follow-up you’re able to address right there on the show floor. That can change the way you measure the return on investment of attending a conference.

Taken individually, things like the decision to add shuttle buses to and from the convention hotels and going casual for the closing reception is really little stuff. But on the flip side, the mindset that drives those decisions — the mission to keep the focus on its members, to keep the focus on the people that came to the show and making sure that those people had the best experience possible — that’s essentially what NACDS did right here.

You can’t focus on the people who AREN’T there. If you do, all you’ll see is the negative space they leave behind, and you’ll probably get nothing accomplished. On the flip side, if you can focus on the people in front of you, you can have a pretty productive meeting. Wayne and I did.

Rob Eder is the editor in chief of The Drug Store News Group, publishers of Drug Store News, DSN Pharmacy Practice, PharmacyTech News, Specialty Pharmacy and Retail Clinician magazines. You can contact him at reder@lf.com.

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